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The Financial Services Authority has slammed insurers for their disinterest in participating in a debate on incoming rules under Solvency II, after it revealed that it received just 20 responses to its recent consultation paper.

The regulator said it was “surprised” to have “so few responses” on its proposed approach to Solvency II implementation, having only received 17 responses from firms and industry representatives in the life industry, two from advisers to the industry and one from the financial services sector.

In feedback on the consultation, which closed on 15 February 2012, the FSA says: “Given the importance of this business in the UK life insurance sector, we are surprised that we had so few responses from those with an interest in this market.”

The FSA adds that the consultation paper raised concerns over the current use of land and property, especially in relation to governance and indirect property holdings.

The regulator flags up that the financial crisis saw a number of firms with highly geared indirect property holdings, finding that such holdings were more illiquid than direct property holdings.

Some firms had difficulties disposing of these and some directly held assets for a fair price. To tackle this, some firms felt it necessary to invoke clauses to defer surrender and transfer requests in linked property funds.

Separately, where firms held indirect property in an unregulated collective investment schemes, they often had to sell direct property holdings in a fund to meet obligations.

The FSA says this sale of direct property meant that some funds went over the 20 per cent limit on indirect property holdings in an Ucis and the 10 per cent gearing limit.

The regulator says: “This breached COBS 21 rules. We took regulatory action against these firms.

“These problems were not seen as an area where we needed to change rules, but were rather an area where we have concerns that some firms were not meeting existing rules due to the financial crisis.

“We saw this as a governance concern and one we said we would address in our later consultation on governance, to be published shortly.”

The paper says that although most respondents supported the FSA’s approach to land and property, particularly its intention not to implement the Ucits restriction.

The regulator says: “However, some respondents said our views on firms’ behaviour, in relation to land and property, were unduly harsh. Many of these respondents highlighted that the deferrals were intended to treat customers fairly and did not affect their ability to meet contractual obligations.